Application of Black Hills Power
2016 S.D. 92
| S.D. | 2016Background
- Black Hills Power (BHP) sought a rate increase with the South Dakota Public Utilities Commission (PUC) in March 2014 using a 12‑month test year ending Sept. 30, 2013; typical customer increase ≈ $10.91/month.
- Black Hills Industrial Intervenors (BHII) were allowed to intervene and disputed certain cost adjustments in BHP’s filing, especially pension normalization and incentive‑compensation costs.
- Parties negotiated a settlement stipulation in December 2014; BHP then filed an amended stipulation in February 2015 changing certain cost allocations, which the PUC accepted.
- BHII challenged the PUC’s approval, arguing (1) the administrative rule ARSD 20:10:13:44 forbids post‑filing adjustments to the cost statement, (2) the PUC improperly excluded 2015 from BHP’s five‑year pension normalization, and (3) insufficient support existed to include portions of BHP’s incentive‑compensation plan.
- The circuit court affirmed the PUC; the South Dakota Supreme Court reviewed the rule interpretation de novo and considered arbitrary/ capricious and sufficiency‑of‑evidence claims.
Issues
| Issue | BHII's Argument | BHP/PUC's Argument | Held |
|---|---|---|---|
| 1. Whether ARSD 20:10:13:44 prohibits adjustments after the initial filing | “Filing” means the initial application; no post‑filing adjustments allowed | “Filing” refers to the filing of each proposed adjustment; adjustments may be filed after initial application | The Court: “filing” modifies adjustments; post‑filing adjustments allowed; PUC interpretation correct |
| 2. Whether PUC erred by excluding 2015 from five‑year pension normalization | If adjustments that raise rates are allowed, BHP must be required to include adjustments (e.g., 2015) that would raise normalized pension costs | Rule permits proposed adjustments but does not mandate the utility propose all possible adjustments; PUC considered evidence and had discretion | The Court: adjustments are permissive; PUC‘s choice to use 2010–2014 normalization was not arbitrary or capricious |
| 3. Whether evidence supported inclusion of incentive‑compensation costs | Insufficient evidence that incentive pay was reasonable, necessary, and prudently incurred | Incentive plan largely tied to safety, retention, and nonfinancial goals; PUC excluded financial‑performance incentives and admitted other portions based on testimony | The Court: preponderance of evidence supported inclusion of portions of the plan; PUC did not err |
Key Cases Cited
- Citibank, N.A. v. S.D. Dep’t of Revenue, 868 N.W.2d 381 (court states that administrative regulations are construed like statutes)
- Nelson v. S.D. State Bd. of Dentistry, 464 N.W.2d 621 (discusses deference to agency interpretation when language is ambiguous or technical)
- City of Sioux Falls v. Ewoldt, 568 N.W.2d 764 (courts may not add words to statutes or rules under guise of construction)
- In re Jarman, 860 N.W.2d 1 (defines arbitrary and capricious standard for administrative decisions)
- Erdahl v. Groff, 576 N.W.2d 15 (mixed questions of law and fact reviewed de novo)